IB Business Management SL Unit 4

What is market share?

the percentage of sales in the total market sold by one business

What is market orientation?

an outward-looking approach basing product decision on consumer demand, as established by market

What is marketing?

the management process responsible for identifying, anticipating, and satisfying consumers' requirements profitably; this links the business to the customer by identifying and meeting the needs of customers; right product at the right price to the right place at the right time

What are management functions?

market research, product design, pricing, advertising, distribution, customer service, and packaging

What is market size?

the total level of sales of all producers within a market

Why is marketing size important?

-a marketing manager can assess whether a market is worth entering or not

-businesses can calculate their own market share

-growth or decline of the market can be identified

Benefits of market orientation

-the chances of newly develop products failing in the market are reduced if research was undertaken first

-if consumer needs are being met with products, they are likely to surivive longer and make higher profits than those that are being sold following a product-led approach

-adapt to changing tastes

Drawbacks of market orientation

-gahtering info can be expensive - requires highly skilled and costly staff

-data is easily available to competitors

-limitations to market research including bias, bad sample size, or outdated info

What is product orientation?

an inward-looking approach that focuses on making products that can be made - or have been made for a long time - and then trying to sell them

-product-oriented businesses invent and develop products in the belief that they will find consumers to purchase them

-product-oriented businesses concentrate their efforts on efficiently producing high-quality goods

Benefits of product orientation

-innovation allows for a competitive advantage (unique selling proposition)

-leads to positive corporate image - strengthens company loyalty

-focus on research and development - more difficult for competition to copy

Drawbacks of product orientation

-requires highly skilled and costly staff

-risky to ignore changing demands of market

-no guarantee that customers will buy the final product

How do you calculate market share %?

sales of business in time period/total market sales in time period * 100

Uses of market share

-sales of business and total market sales can be measured in either units or sales value

-often the most effective way to measure the relative success of one business's marketing strategy against that of its competitors

-if omarket share is increasing, the marketing has been relatively successful

ways to increase market share

-lower prices than those of competitors

-better cusomter service leading to high levels of customer satisfaction

-innovations in product or customer service hich have not yet been matched by competitors

-selling through new channels to reach more consumers

-increasing customers loyalty and encouraing these existing customers to buy more

What is market leadership?

when a business has the highest market share of all firms that operate in that market

What is market growth?

the percentage change in the total size of a market (volume or value) over a period of time

How do you calculate annual market growth %?

(total market sales this year - total market sales last year)/total market sales last year * 100

After market research how does one makke strategic decisions?

based on

product: what people want

pricing: what is too high? too low?

promotion: how or to whom are you going to advertise?

distribution: how will you get it to customers?

Why does market grow?

-technologically advanced products appeal to others

-people's increasing incomes (more potential to buy)

-increasing population sizes (higher demand)

-lower barriers to trade due to international trade assessment

-legal changes (i.e. electric vehicles - soon in california electric vehicles will be the most predomninat

-consumer taste changes

What is the unique selling point (USP)?

the special feature of a product or customer service that makes it different from those of competitors

-lower cost

-better quality

-first of its kind

What is a target market?

the segment of the market that a particular product is aimed at

What is a market segment?

a sub-group of a market made up of consumers with similar characteristics, tastes, and preferences

What is marketing planning?

the process of developing appropriate strategies and preparing marketing activities to meet marketing objectives

What is a marketing plan?

a formal written document which outlines in detail how the business unit intends to achieve the marketing objectives derived from the overall business objectives

What are the main elements of a marketing plan?

-SMART Objectives

-sales forcasts

-budget

-strategies

-action plans that show marketing tactics

What happens if a business adopts mass marketing?

it is not important to differentiate between marketing segments as the "whole market" is being targeted with the same product

What is segmentation?

attempts are made to aim their products at particular group sof consumers, believing that these groups demand slightly different products

What is market segmentation?

identifying different segments within a market and targeting different products or services to them

What is the first stage in the market segmentation process?

to research the whole market and identify specific consumer groups with it

What are the roles in marketing plans?

-provide focus to the work of the marketing department and a road map of the stages to be taken in implementing market strategies

-effective marketing planning will ensure that marketing strategies and tactics are linked to SMART objectives. this will increase the likelihood of the marketing campaign's success

-marketing budget will be planned in advance with the finance department and should be adequate to achieve the campaign's objectives

-marketing planning helps achieve the integration of different business functions as all departments will ened to be involved

-planning marketing ahead helps to ensure that the marketing mix is appropriate and fully integrated

What are the limitations of marketing plans?

-plans that are not revised to meet changing internal or external conditions will become outdated

-must be a constant process. an old plan will be ineffective when market conditions change. they nee to be reviewed constantly and the final outcome of the planned strategy must be judged against the original objectives to aid future decision-making

-marketing plans need to be based on an up-to-date assessment of the market and ocnsumer preferences or it will be inappropriate for current conditions

What are target markets?

the market segments that the business plans to aim its product at

What is marketing mix?

the key decisions that mst be taken in the effective marketing of a product

-product

-price

-promotion

-place

What does successful segmentation require?

requires a business to have a very clear picture of the consumers in the target market it is aiming to sell in

What is consumer profile?

a quantified picture of consumers of a firm's products, showing proportions of age groups, income levels, location, gender, and social class

What are geographic differences?

consumer tastes may vary between different geographic areas. it may be appropriate to offer different products and market them in "location-specific" ways

-population density

-climate

-geographic location

What are demographic differences?

-commonly used basis for segmentation as age, sex, family size, and ethnic background

-income differences

-social class

-age

-education

-family lifestyle

-family size

-income

-nationality

-race

-religion

-gender

Psychographic factors

these are to do with differences between people's lifestyles, personalities, values and attitudes

What is lifestyle?

broad term which relates to activities undertaken, interests, and opinion, rather than personality

What are advantages of market segmentation?

- Businesses can define their target market precisely and design and produce goods that are specifically aimed at these groups leading to increased sales.

- It helps to identify gaps in the market. groups that are not being targeted

- Differentiated marketing strategies can be focused on target market groups. avoids wasting money on trying to sell products to whole market

- Small firms unable to compete in the whole market are able to specialise in one or two market segments.

What are disadvantages of market segmentation?

- Research and development and production costs might be high as a result of marketing several different product variations.

- Promotional costs might be high as different advertisements and promotions might be needed for different segments - marketing economies of scale may not be fully exploited.

- Production and stock-holding costs might be higher than just producing and stocking one undifferentiated product

- By focusing on one or two limited market segments there is a danger that excessive specialisation could lead to problems if consumers in those segments change their purchasing habits significantly.

What is product positioning?

the process of designing the company's products and image to occupy a distinctive place in the perceptions of consumers in the target market

how a new brand will relate to other brands

What is the product positioning map/perception map?

a diagram that analyzes consumer perceptions of competing brands in respect of two product characterstics

What are some key features of the perception map?

-price

-perceived quality

-perceived brand image

-level of comfort

-customer service levels

product positioning analysis could be used in a number of ways:

-identifies potential gaps in the market. could be the segment the business should aim for

-by identifying sector with greatest niche potential, the marketing manager is then made aware of the key features of the prodct that should be promoted the most

-when analysis is used to monitor position of existing brands a marketing manager can see if a repositioning of one of them is required. could invovle new advertising or restyled packaging

-helps identify how to adjust strategy

What is niche marketing?

identifying and exploiting a small segment of a larger market by developing products to suit it

can involve targeting products at a very small section of the whole market

What is mass marketing?

selling the same products to the whole group marketing with no attempt to target groups within it

What is a mass market?

a market for products that are often standardized and sold for large quantities

What are the advantages of niche marketing (and disadvantages of mass marketing)?

-small firms may be able to survive and thrive in markets that are dominated by larger firms

-if market is unexploited by competitors, then filling a niche can offer the chance to sell at high prices and high profit margins. consumers will often pay more for an exclusive product

-niche market products can also be used by large firms to create status and image

What are advatnages of mass marketing (and disadvantages of niche marketing)?

-small-market niches do not allow economies of scale to be achieved. therefore, mass-market businesses are likely to enjoy substantially lower average costs of production

-mass-marketing strategies run fewer risks than niche strategies. as niche markets contain relatively small numbers of consumers, any change in consumer buying habits could lead to a rapid decline in sales

What are the benefits of an effective USP?

- effective promotion which focuses on the differentiating feature of the product or service

- opportunities to charge higher prices due to exclusive design/ service

- free publicity from business media reporting on the USP

- higher sales than undifferentiated products

- customers more willing to be identified with the brand because 'it's different'

Form of differentiation: low/lowest prices

benefits:

◦ Consumers have limited spending power. low prices always attract a high proportion of consumers

limitations:

◦ Will attract high proportion

◦ Will profit fall if profit margin is reduced to low levels?

◦ Do low prices integrate with the rest of the marketing mix?

◦ Could consumers perceive the product to be low of quality too?

◦ Globalization is increasing the number of low priced products

Form of differentiation: trust

benefits:

◦ Customers are careful to spend their incomes wisely. They want to buy from companies they trust and believe in

◦ If a business successfully builds up customer relations, loyalty will be high

limitations:

◦ Trust is difficult to establish

◦ Trust can be damaged and it is difficult to reestablish trust

Form of differentiation: ethical stance

benefits:

◦ Consumers are very keen to support companies that adopt an ethnical stance

limitations:

◦ In some markets low prices are more important than ethnical positions

◦ A lack of genuine ethnical position could lead to a loss of trust if consumers discover that the business was really only adopting a misleading or false show of ethical behaviors

Form of differentiation: purchase convenience

benefits:

◦ Consumers' lack of time or dislike of shopping experience means that more convenient ways to browse and purchase could create effective differentiatione

limitations:

◦ These methods of convenient shopping are now so widespread that it is difficult to gain true, long-lasting differentiation

◦ If all businesses offer online shopping, how can any one business be different?

Form of differentiation: innovation

benefits:

◦ If this is the result of R&D that leads to patented products or processes, then it can be difficult for competitors to copy this form of differentiation

limitations:

◦ R&D is an expensive and time consuming process

◦ Constant development may be needed. needs to commit resources into developing innovative products that differentiate the business and its brands

◦ The resources needed for successful R&D might be beyond many businesses

What is the Boston Consulting Group (BCG) matrix?

a method of analyzing the product portfolio of a business in terms of market share and market growth. also analyzes what future marketing strategies the business could take

What is low market growth and high market share?

cash cows

-well established product in a mature market

-profitable and creates a high positive cash flow

-sales are high relative to market and promotional costs are likely to be low as a result of high consumer awareness

-product can be milked and injected into some of the other products in the portfolio

What is high market growth and high market share?

star

-clearly successful product in an expanding market

-keen to maintain the market position of this product in what may be a fash-changing market

-promotion cost will be high to help differentiate the product and reinforce its bran image

-likely to generate high amounts of income

What is high market growth and low market share?

question mark

-consumes resources but generates little return

-if newly launched, it is going to need heavy promotion costs to help become established

-future of the product may be uncertain, so quick decisions need to be taken if sales do not improve

-changes could involve revising the design, relaunching with a new brand image, or even withdrawal

-should have potential as it is selling in a market sector that is growing fast

What is low market growth and low market share?

dog

-offers little to the business either in terms of existing sales and cash flow or future prospects because the market is not growing

-may need to be replaced soon with a new product development

-could decide to withdraw from this market and position itself into faster-growing sectors

When is the Boston matrix analysis relevant?

-analyzing the performance and current position of existing product portfolios

-deciding on what action to be taken with existing products

-planning for the introduction of new products

Full analysis includes what marketing decisions?

-building - supporting question mark products with additional advertising or further distribution outlets

-holding - continuing support for star products. freshen the product

-milking - taking the postiive cash flow from established products and investing it in other products in the portfolio

-divesting - identifying worst-performing dogs and stopping the production and supply of these. this will invovle other issues such as impact on workforce and whether the spare capactiy freed up by stopping production can be used profitably on another product

What are the limitations of using the Boston matrix?

-on its own, the Boston matrix cannot tell a manager what will happen next with any product. detailed and continuous market research will help. must be conscious of possible dramatic effects of competitors' decisions, technilogical changes, and the fluctuating economic environment

-matrix is only a planning tool. has been criticized for simplifying the complex set of factors that determine product success

-assumes that higher rates of profit are directly related to high market shares. not necessarily the case when sales are being gained by reducing prices and profit margins

what is market research?

process of collecting, recording, and analyzing data bout customers, competitors, and the market

market research anaylzes customers for?

-different prince levels

-alternative forms of promotion

-new types of packaging

-different methods of distribution

identifying main features of a market:

-overall size - is it worthwhile for the business to be entering the market?

-growth - is the market becoming bigger or smaller in terms of sales?

-competitors - how many other businesses are selling similar products, how much market power do they hve?

NPD process --> market research process

identify consumer needs and tastes --> primary and secondary research into consumer needs and competitors

product idea and packaging design --> testing of product and packaging with consumer groups

brand positioning and advertising testing --> pre-tessting of the product image and advertisements

product launch and after launch period --> mointoring of sales

why carry out market research?

-to identify main features of market and reduce risk of entry

-to predict future demand changes and market trends

-to explain conusmer buying patterns for existing products and trends

-to assess most favored products

what is primary research?

the collection of first-hand data that is directly related to a firm's needs

what is secondary research?

collection of data from second-hand sources

adv of primary research

-up to date and therefore more useful than secondary data

-relevant and directly addresses questions

-confidential

-increasing use of IT reduces cost of primary research

disadv of primary research

-costly

-time consuming

-doubts over accuracy and validity - sampling error

adv of secondary research

-often obtainable very cheaply

-identifies the nature of the market and assists with planning primary research

-provides insigh on competitors

-obtainable quickly

-allows for comparison

disadv secondary research

-may not be updated frequently and may be out of date

-may not be entirely suitable or presented in most effective way

-accuracy may be unkown

-might not be available for completely new product developments

-accuracy must be checked

methods of primary research

- Surveys - a detailed study of a market or geographical area o gather data

- Interviews

- Focus groups - a group of people who are asked about their attitude towards a product, service, etc.

- Observations

what are two ways primary research can be collected?

quantitative -- presented graphically and analyzed statistically

qualitative -- features that wold influence choice

what are the types of questions that can be asked in primary research (surveys)?

open questions - those that invite a wide ranging or imaginative response (lots of consumer reasoning, little numberical help)

closed questions - questiosn to which a limited number of preset answers is offered (little consumer reasoning, lots of numerical data)

what are advs and disadvs of surveys?

adv:

-large data relatively quickly

-relatively cheap with online sites

-less expensive and less time consuming

-can collect info for a broad range

disadv:

-face-to-face surveys can be expensive and time consuming

-can suffer from selection or interviewer bias

-participants may be reluctant to fill out questionnaires or do so in a rushed manner

-answer choices may not represent truly how customers feel

-participants may not be truthful

what are adv and disadv of interviews?

adv:

-specifically designed

-large amounts of qualitative data

-clarification of questions or responses can take place

disadv:

-findings might not be representative of opinions of whole market

-potential interviewer bias

-can be time consuming and costly

what are adv and disadv of focus groups?

adv:

-help identify desires and preferences of different segments. improves marketing mix and strategy

-gather opinions and attitudes of customers

disadv:

-can be time consuming and expensive

-views and feedback are not always representative of whole market

-peer pressure and courtesy may force partcipants to give not the whole truth

what are adv and disadv of observations?

adv:

-not reliant on willingness of people to partciipate

-results are likely to be accurate, realistic, and representative

disadv:

-time consuming

-subjects may act differently if they know they are being monitored

what are the forms of secondary market research?

-market intelligence and analysis reports

-academic journals

-government publications

-trade organizations

-media articles and specialist publications

-online

what are the adv and disadv of market analyses?

adv:

-generally cheaper and less time consuming to gather than primary research

-information has already been gathered. up-to-date market data and trends

-provides detailed information about various aspects of a product or market

-research agencies specialize in producng market analyses, providng detailed intelligence reports

disadv:

-can be expensive as they usually have to be paid for

-can become dated quickly

-accessible by rivals

what are the adv and disadv of academic journals?

adv:

-articles contain most up-to-date research in an academic discipline

-likely to be reliable

disadv:

-not always relevant to business

-may be blocked by paywall

what are the adv and disadv of government publications?

adv:

-data and stats from government are usualyl comprehensive, reliable, and up-to-date

-large volume of government publications, covering a wide range of topics

-many publications are free

disadv:

-identifying and locating government publictions can be difficult

-not all data and info are readily available or are only obtainable for a fee

what is a sample?

group of people taking part in a market research survey selected to be representative of the whole target market

what is sampling error?

mistakes in research caused by using a sample for data collection rather than the whole target population

what is random sampling?

every member of the target population has an equal chance of being selected

what is convenience sampling?

drawing a representative selection of pepople because of the ease of volunteering or selecting people because of their availability or access

what are the adv and disadv of quota sampling?

adv:

-enables researchers to gather representative data

-suitable when researchers want to detect possible relationships between sub-groups

-enables researchers to investigate particular traits of certain sub-groups

-researcher has control

-findings are usually more reliable

disadv:

-time consuming to determine characteristics on which they base quota sample on

-selection is not random -- researcher bias and sampling errors

what are the adv and disadv of random sampling?

adv:

-results are random as everyone selected has an equal chance

-resuslts are free from researcher bias and samplign errors

-quick and simple

disadv:

-only tends to work well if memebers of a population are likely to have similar views

-sample could be very skewed

-needs to be large enough to generate results consistent with opinions of whole population

what are the adv and disadv of convenience sampling?

adv:

-created by using research subjects who are easily and readily accessible

-quickest, easiest, and cheapest

disadv:

-results may be biased and atypical

-unlikely to have an accurate representation of whole population

what is quota sampling?

gaathering data from a number of people chosen out of a specific sub-group

what are the ways to present quantitative data?

bar charts - used for absolute size of magnitude

pie charts - used for relative importance

infographics - graphic and visual representations of data

what is the mean and its uses?

the mathematical average obtained by adding all results and dividing by the number of results

uses:

-when range is small

-used for making comparisons

what are the adv and disadv of using the mean?

adv:

-uses all data

-easily understood

-can be used to analyze data futher

disadv:

-easily affected by one or two extremes

-commonly not a whole number

what is the mode and its uses?

the most frequently occurring result

uses:

-result could be sent for stock-ordering purposes

what are the adv and disadv of the mode?

adv:

-easily observed and no caluclation necessary

disadv:

-results estimated the modal group

does not consider all data

-may be more than one modal result

what is the median and its uses?

the middle result when data is put in order

uses:

-could be used in wage negotiations

-often used in advertising